Manufacturers’ woes intensify after extremely bleak Q1

Fundamental conditions are not positive.

Manufacturers’ woes will only intensify further after an extremely bleak Q1, a report by DBS warned.

DBS noted that the sector’s outlook is still dotted with risks , with headline growth hit with another contraction and industrial output booking its worst deceleration in two years.

“Fundamentally, conditions are not positive. As long as outlook for the global economy does not improve, manufacturers will continue to struggle, regardless of how you look at it - half full or half empty,” DBS stated.

Here’s more from the report:

But despite the upward revision to 1Q15 GDP, which came partially from an overly cautious estimation for the manufacturing sector, outlook for the sector is still dotted with risks.

Headline growth for the overall manufacturing sector moderated to -2.7% YoY, from an already weak -1.3% previously.

And industrial production growth for April has further confirmed the cloudy outlook. Overall industrial output for the month declined by 8.7% YoY. This is the sharpest deceleration since Feb13.

While production output in the electronics cluster was up marginally by 1.2% YoY, it was over-written by a 28.6% plunge in biomedical output.

In fact, manufacturing outlook is bleak from the PMI perspective. Latest manufacturing PMI dipped further by 0.2pt to 49.4 in April. This is the fifth consecutive month of contraction and the picture from the sub-indexes looks even direr.

Most are below 50 (i.e., contraction level) with key sub-indexes such as new export orders, production, inventory, stocks of finished goods, imports and order backlog all falling further.